A division bench of acting Chief Justice D D Sinha and Justice K K Tated directed the union ministry to inform the court by January 15 either about its decision on the proposal or in how much time they will decide on it.
The high court had on the last hearing issued a "stop work" notice on the construction pending MoEF's decision.
Maharashtra government had contended the river water is meant for drinking purposes and if a dam is constructed it would improve drinking water availability in areas like Mira-Bhayander and Navi Mumbai.
The bench was hearing a Public Interest Litigation filed by NGO 'Shramik Mukti Sanghatana' alleging the dam is being built without permissions from the forest department.
According to the PIL, the dam, if built, would submerge an area of 2100 hectares including 1000 hectares of forest and displace four villages.
The MoEF too had claimed its Forest Advisory Committee has recommended against construction of the structure.